Battling financial crime has become one of the Financial Conduct Authority’s main objectives but data suggests combating fraud should be one of the top priorities for the global life insurance sector.
Boston Consulting Group and research firm Limra surveyed 508 life sector C-suite executives from 62 different markets, including 98 responses from chief executives and presidents.
The majority (79%) highlighted fraud as a concern.
The most concerning type of fraud for this group is claims and disbursement (69%) by an overwhelming majority, followed by new business fraud (37%), account takeover (17%) and beneficiary designation (11%).
“Fraud is a growing concern among life insurance executives.” Alison Salka, senior vice president and director of Limra Research, said. “Fraud not only hurts a company’s bottom line but damages its reputation and consumer trust.”
FCA chair Charles Randall recently said that “financial crime in the UK, specifically fraud against individuals, has reached epidemic proportions”.
The survey said also found change management (32%) to be the greatest global challenge. This is defined as “actions that equip companies to successfully manage any kind of transformation, with a focus on people, processes, and technology”.
Customer experience (23%) and growth (22%) made up the top three.
For life insurance chief executives and presidents, change management and customer experience were the joint greatest global challenges at 27%.
Distribution (25%) was second and growth (22%) came in at third.
In 2015 and 2017, talent management took top spot, followed by growth and technology, in respective years.
“In today’s business environment, executives are realising that having the right talent is not enough to address the external forces transforming the business landscape,” said Salka. “To transform their entire organisations, executives must cultivate corporate cultures that not only fully embrace change, but can also sustain it over the long term.”
Globally, there was a difference in the mindset for life insurance C-suite executives.
In Emea, customer experience (31%) was the greatest challenge, followed by change management (29%) and regulation (27%).
Change management (34%) took top spot in Asia, while Latin American C-suite executives believe customer experience (42%) is the greatest challenge to the life sector.
North American big wigs picked growth (34%) as the biggest challenge.
Image: Greatest global challenge for the life insurance industry by region
Source: Boston Consulting Group and Limra
Many of the most difficult challenges life insurers face are caused by factors beyond their control.
Technology (64%) was voted the issue with the most impact for the industry by all 508 respondents.
Customer behaviour was second at 54%, followed by regulation (45%) and the economy (40%).
Surprisingly, with all of attention towards issues like Brexit and trade wars , only 15% said politics and government.
The firms also asked life insurance executives which technologies, tools, and data they regard as most critical to their success.
AI (41%) and automation (41%) were chosen as the tech advances that will bolster business for life firms.
Customer services was again a focus, with technology to help this area weighing in at 33%, as did data science.
Despite it being such a global phenomenon, social media was not seen as a important area for success for life insurers, only receiving 12% of the vote.
“Life insurance executives have long been aware they need to change their organisations and deploy new digital technologies to improve customer experience, become more efficient, and develop products that are more tailored to individual needs,” said Tim Calvert, managing director and partner and global leader of BCG’s Life Insurance practice.
“Our research indicates that they are now ready to do something about it.”
The report’s authors offer three suggestions for life insurers to consider for the future:
- Instil a pro-change culture: “A corporate culture of change is a pre-requisite if life insurers are to make their businesses more customer-centric. That begins with having the right people across the organisation that believe in change”;
- Focus on the customer: “The first thing to remember about improving the customer experience is that authenticity and agility are key. Insurers need to better understand the needs of their customers by closely and regularly monitoring customer journeys to determine what is going well and what needs to improve”; and
- Think strategically about technology: “For the industry to truly achieve the quality of digital experience and operational efficiency they desire, technology must become more central to the overall business strategy and be viewed as a source of competitive advantage—rather than merely a cost”.